What is cryptocurrency?
Cryptocurrency is a digital coin designed for exchange between people in virtual transactions. Cryptocurrencies exist only as digital data, not physical objects - this means that you cannot store Bitcoin in a safe. For example, owning a cryptocurrency like Bitcoin means that you have a collective agreement for each computer in the blockchain network.
When a new cryptocurrency is being released, their creators state how many coins will be mined. As soon as this amount is reached, no additional coins can be produced. The original digital coin introduced was Bitcoin, which today remains the benchmark for all other digital coins. Among other cryptocurrencies that are popular in trading: Ethereum, Ripple, Litecoin, Dash.
How does the cryptocurrency market work?
Cryptocurrency markets are decentralized - this means that they have not been released and supported by the central authority, like a government. Instead, they are supported by a network of computers.
Cryptocurrencies can be bought and sold through crypto exchanges and stored in digital wallets. Unlike real currency, cryptocurrencies exist only as a general digital record of the owner stored on the blockchain. When a user wants to send cryptocurrency modules to another user, they send it to that user's digital wallet. A transaction is not considered completed until it is verified and added to the blockchain using a process called mining.
What factors affect the cryptocurrency market
Cryptocurrency markets move in accordance with supply and demand. However, since they are decentralized, they remain free from many economic and political problems. Although there is still a lot of uncertainty regarding cryptocurrencies, the following factors can have a significant impact on their prices:
How to trade cryptocurrencies
There are two popular ways of making money on cryptocurrency.
1. Buying cryptocurrency on exchanges. Here you own a cryptocurrency and wait for a significant increase in prices in order to sell it profitably.
2. Exchange of contracts for difference (CFD) for a specific cryptocurrency. CFD is a derivative product in which the broker agrees to pay the difference between the value of the dated paper between two dates; opening and closing dates of the contract. You can hold a long position (it is assumed that the price will rise) or a short position.
There are important differences between buying a cryptocurrency and trading a cryptocurrency with CFD. When buying cryptocurrency, you save it in your wallet, but when trading CFDs, you have more flexibility, since you are not tied to an asset; you just buy or sell a corresponding contract.
Features of cryptocurrency trading today
Today, the cryptocurrency market does not show intense fluctuations, as it was during the “Bitcoins Boom” in 2016. However, cryptocurrencies dynamics is much higher than other currencies.
At the moment, there is a huge number of types of alternative money. However, these projects only collect money from people and in a short period fail. For this reason, Barclay Stone recommends working only with proven cryptocurrencies (Bitcoin, Etherium, Litecoin).